JCB India Ltd., New Delhi v. Addl. CIT, New Delhi

ITA 5200/DEL/2010 | 2006-2007
Pronouncement Date: 31-01-2011 | Result: Allowed

Appeal Details

RSA Number 520020114 RSA 2010
Assessee PAN AAACE0078P
Bench Delhi
Appeal Number ITA 5200/DEL/2010
Duration Of Justice 2 month(s) 7 day(s)
Appellant JCB India Ltd., New Delhi
Respondent Addl. CIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 31-01-2011
Assessment Year 2006-2007
Appeal Filed On 23-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.5200/DEL/2010 ASSESSMENT YEAR : 2006-07 JCB INDIA LIMITED B-1/I-1 2 ND FLOOR MOHAN COOPERATIVE INDUSTRIAL ESTATE MATHURA ROAD NEW DELHI 110 044. PAN : AAACE0078P VS. ADDITIONAL COMMISSIONER OF INCOME-TAX RANGE-4 NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAHUL MITRA CA & SHRI RAJESH VERMA CA REVENUE BY : SHRI J. MISHRA CIT DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE UNDER THE PROVISI ONS OF SECTION 253 (1) (D) OF THE IT ACT 1961 AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER DATED 25 TH OCTOBER 2010 U/S 143 (3) READ WITH SECTION 144C OF THE INCOME-TAX ACT 1961 (THE ACT). THE MAIN ADDITION IN THE PRESENT APPEAL IS AN ADDITION OF `40 67 16 966 /- ON ACCOUNT OF VARIATION IN INCOME AS A CONSEQUENCE OF ORDER OF TRAN SFER PRICING OFFICER (TPO) U/S 92C (3) OF THE ACT. OTHERS ARE SMAL L FOLLOWING ADDITIONS:- I) ` 2 627/- ON ACCOUNT OF DISALLOWANCE U/S 14A READ WITH RULE 8D. ITA NO.5200/DEL/2010 2 II) ` 6 20 230/- ON ACCOUNT OF DISALLOWANCE OF PAYME NT U/S 40 (A)(I). III) ` 27 08 000/- ON ACCOUNT OF DISALLOWANCE OF PAY MENT U/S 40(A)(IA) 2. A DRAFT ORDER WAS PREPARED BY THE LEARNED ASSESSING O FFICER U/S 144C WHICH WAS SENT TO DRP WHEREIN THE INCOME OF THE ASSESSEE WAS ASSESSED AT ` 255 45 21 520/- AGAINST THE RETURNED INCOM E OF ` 214 44 73 701/- IN WHICH THE ABOVE MENTIONED ADDITI ONS WERE MADE. THE ASSESSEE HAD FILED OBJECTIONS BEFORE THE DISPUTE RESOL UTION PANEL (DRP) AGAINST THE SAID DRAFT ORDER OF THE ASSESSING OFFIC ER ON 31 ST DECEMBER 2009 AND THE SAID OBJECTIONS OF THE ASSESSEE WE RE DISPOSED OF BY THE DISPUTE RESOLUTION PANEL II INCOME-TAX DE PARTMENT NEW DELHI VIDE ORDER DATED 30 TH SEPTEMBER 2010 AND THE CONTENTS OF THE SAID ORDER ARE AS UNDER:- DIRECTIONS U/S 144C(5) OF THE INCOME TAX ACT 1961 THE ABOVE ASSESSEE HAS FILED OBJECTIONS U/S 144C(2)( B) OF THE INCOME TAX ACT (THE ACT) ON 31.12.2009 IN RESPECT OF THE DRAFT ASSESSMENT ORDERS SERVED ON THE ASSESSEE ON 02.12.09 PROPOSED BY THE ASSESSEE ADDL. IT RANGE-4 NEW DELH I. WE HAVE GONE THROUGH THE DRAFT ASSESSMENT ORDER. WE HA VE ALSO HEARD THE AUTHORISED REPRESENTATIVE (AR) AND HAVE CONSIDERED THE OBJECTIONS OF THE ASSESSEE CAREFULLY. AFTER CONSIDERING THE SAME WE ARE OF THE OPINION THAT THE DRA FT ASSESSMENT ORDER PROPOSED BY THE ASSESSING OFFICER IS TO BE APPROVED. DIRECTIONS THE A.O. IS DIRECTED TO COMPLETE THE ASSESSMENT AS PROPO SED IN THE DRAFT ASSESSMENT ORDER. SD/- SD/- SD/- (S.G. JOSHI) (HARI KRISHAN) (VIRENDRA SINGH) MEMBER MEMBER MEMBER F.NO.DRP-II/3/119 DATE : 30.9.10. ITA NO.5200/DEL/2010 3 3. IT IS IN PURSUANCE OF THE AFOREMENTIONED ORDER THE ASSESSING OFFICER HAS PASSED THE AFOREMENTIONED CONFIRMATORY ORD ER DATED 25 TH OCTOBER 2010AGAINST WHICH THE ASSESSEE IS AGGRIEVED HEN CE IN APPEAL. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THE LD. DISPUTE RESOLUTION PANEL (LD. DRP) AND THE LD. ADDITIONAL COMMISSIONER OF INCOME TAX (LD. AO) (FO LLOWING THE DIRECTIONS OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY RS. 406 716 966 ON ACC OUNT OF THE TRANSFER PRICING (TP) ADJUSTMENT U/S 92CA(3) OF THE I.T. ACT 1961 (ACT) MADE BY THE LD. ADDITIONAL COMMISSION ER OF INCOME TAX TRANSFER PRICING OFFICER 1(3) (LD. TPO ) BY HOLDING THAT THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISES (AES) ON SALES OF THE PRODUCT WHEELED EXCAVATOR LOADER (3DX) DOES NOT SATISFY THE ARMS LE NGTH PRINCIPLE ENVISAGED UNDER THE ACT. 2. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTION S OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN UPHOLDING THE LD. TPOS STANCE OF DISREGARDING THE BENCHMARKING APPROACH AND METHODOLOGY FOLLOWED BY THE APPELLANT FOR DETERMINING TH E ARMS LENGTH NATURE OF THE TP ARRANGEMENT WITH REGARD TO PAYMENT OF ROYALTY TO OVERSEAS AES (INCLUDING ROYALTY PAYABLE ON SALES OF 3DX) IN ITS TP DOCUMENTATION MAINTAINED U/S 92D OF THE ACT READ WITH RULE 10D OF THE INCOME TAX RULES 196 2. 3. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTION S OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN UPHOLDING THE LD. TPOS STANCE OF ERRONEOUSLY CONCLUDING THAT THE ARMS LENGTH P RICE OF THE TRANSACTION OF PAYMENT OF ROYALTY TO OVERSEAS AES ON SALES OF THE 3DX SHOULD BE NIL AND IN DOING SO: 3.1 NOT APPRECIATING THE FACT THAT THE APPELLANT LEVERAGE D CONSIDERABLY ON THE TECHNOLOGY AND KNOW-HOW RECEIVED BY IT FROM THE AES AND DERIVED SUBSTANTIAL ECONOMIC/COMMERCI AL BENEFITS FROM IT IN RETURN FOR WHICH A ROYALTY WAS PAI D BY THE APPELLANT TO THE AES; 3.2 NOT APPRECIATING THE FACT THAT THE 3DX WAS A MUCH SUPERIOR AND ADVANCED PRODUCT IN TERMS OF TECHNOLOGY/FEATURES/SPECIFICATIONS/BENEFITS AS COMPARED TO THE OLDER PRODUCT 3D AND WAS NOT MERELY A COSMETIC VARIANT OF THE 3D; AND 3.3 DISREGARDING THE VARIOUS SUBMISSIONS AND DOCU MENTARY EVIDENCES FILED BY THE APPELLANT TO ESTABLISH THE BONAFI DE OF THE TRANSACTION ON THE BASIS OF PRE-CONCEIVED NOTIONS SUR MISES AND ITA NO.5200/DEL/2010 4 CONJECTURES AND WITHOUT PROVIDING ANY COGENT EVIDENCE FACTS OR REASONS WHATSOEVER. 4. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTION S OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN UPHOLDING THE LD. TPOS STANCE OF MAKING AN ADJUSTMENT TO THE TRANSACTION OF PAYME NT OF ROYALTY BY THE APPELLANT TO OVERSEAS AES ON SALES OF THE 3DX DURING THE YEAR IN COMPLETE DISREGARD OF THE FACT THAT: 4.1 A LUMP-SUM PAYMENT FOR THE SAME TECHNOLOGY WAS A LSO MADE BY THE APPELLANT TO ITS AES DURING THE PREVIOUS YEA R I.E. FINANCIAL YEAR 2004-05; AND 4.2 NO ADVERSE INFERENCE WAS DRAWN ON THE TRANSFER PRICE OF THE AFOREMENTIONED TRANSACTION DURING THE TP ASSESSMENT PROCEEDINGS FOR FINANCIAL YEAR 2004-05. 5. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTION S OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN DISREGARDING THE VARIOUS ADDITIONAL DOCUMENTARY EVIDENCES FILED BY THE APPELLAN T DURING THE COURSE OF THE DRP PROCEEDINGS TO ESTABLISH THAT THE 3D X WAS A NEW PRODUCT AND A QUANTUM CHANGE/IMPROVEMENT FROM THE EARLIER PRODUCT 3D AS IT WAS BUILT ON A NEW PLATFORM P- 92 AND NOT MERELY A COSMETIC VARIANT. 6. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTION S OF THE LD. DRP) ERRED ON FACTS AND IN LAW IN NOT ISSUING A SPEAKING ORDER/DIRECTIONS AND IN DISPOSING OFF THE APPELLANTS DETAILED SUBMISSIONS AND OBJECTIONS AGAINST THE TP ADJUSTMENT IN A CRYPTIC MANNER WITHOUT APPROPRIATELY DISCUSSING/APPRECIATING/UNDERSTANDING THE MERITS OF THE CASE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. AO ERRED IN DISALLOWING AN AMOUNT OF RS. 630 230 ON PAYMENTS MADE TO NON-RESIDENTS DEALERS IN THE NATURE OF SALES CO MMISSION AND SALES SUPPORT CHARGES ON ACCOUNT OF SALES OF COMP ANIES PRODUCTS WHOLLY OUTSIDE INDIA WITHOUT DEDUCTION OF TAX AT SOURCE U/S 40(A)(I) OF THE ACT WITHOUT APPRECIATING THAT: - THE PAYMENT MADE TO THE NON-RESIDENT DEALERS IS NOT IN THE NATURE OF INCOME RECEIVED/DEEMED TO RECEIVE OR ARISE OR ACCRUED OR DEEMED TO ACCRUE OR ARISE IN INDIA ACCOR DINGLY IS NOT CHARGEABLE TO TAX IN INDIA. - THE CASE IS COVERED BY THE CIRCULAR NO.23 DATED 23.7. 1969 READ WITH CIRCULAR NO. 786 DATED 7.2.2000 ISSUED BY TH E CENTRAL BOARD OF DIRECT TAXES WHICH WAS IN FORCE DURI NG THE RELEVANT PERIOD. 7.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. AO ERRED IN HOLDING THAT THE APPELLANT HAS FAILED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TO THE NON-RESIDENT DEALER S OF ITA NO.5200/DEL/2010 5 THE APPELLANT U/S 195 OF THE ACT WITHOUT APPRECIATING THAT PROVISION OF SEC. 195 CAN BE INVOKED ONLY IF THE PAY MENT IS CHARGEABLE TO TAX IN INDIA. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. AO ERRED IN HOLDING THAT THE APPELLANT HAS FAILED TO DED UCT TAX AT SOURCE ON PAYMENTS MADE TO TBL ENTERPRISE FOR INR 2 70 8 000 WITHOUT APPRECIATING THAT THE APPELLANT IS NOT BOUND TO DEDU CT TDS WHEN THE SUBJECT INCOME IS EXEMPT FROM TAX U/S 10(2 6) OF THE ACT AND THE RECIPIENT I.E. TBL ENTERPRISE A SOLE PRO PRIETORSHIP FIRM OF MR. R. SANGKHUMA HAD OBTAINED A CERTIFICATE F ROM THE SPECIFIED AUTHORITY CERTIFYING THAT THE RECIPIENT IS QUALI FIED FOR EXEMPTION UNDER THE SAID SECTION AND A COY OF THE SAME DULY CERTIFIED BY A GAZETTED OFFICER HAD BEEN FURNISHED TO TH E PAYER BY THE RECIPIENT. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO ERRED IN MAKING ADDITION OF RS. 2 627 ON ACCOUNT OF NOTIONAL DISALLOWANCE ON INVESTMENTS BY INVOKING SE C. 14A OF THE ACT READ WITH RULE 8D WITHOUT APPRECIATING THAT: - THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR IN QUESTION. - THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE TOWARDS EARNING THE EXEMPT INCOME. 10. THE LD. AO ALSO ERRED IN FACTS AND IN LAW IN INI TIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO E ACH OTHER. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD ALTER AMEN D OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TI ME OF HEARING OF THIS APPEAL. 4. THE BRIEF FACTS OF THE CASE ARE AS UNDER. THE ASSESSEE COMPANY (FOR SHORT JCB) IS WHOLLY OWNED SUBSIDIARY OF J.C. BAMF ORD EXCAVATORS LTD. UK AND IS PRIMARILY INVOLVED IN MANUFACTURE OF EARTH MOVING AND CONSTRUCTION EQUIPMENT. THE ASSESSEE COMMENCED OPERATIO N AS A JOINT VENTURE (JV) WITH ESCORTS LTD. IN 1979. ACCORD ING TO THE ASSESSEE IT OPERATED AS A MANUFACTURER OF EARTH MOVING AND CO NSTRUCTION EQUIPMENTS DURING THE FINANCIAL YEAR 2005-06 AND ENT ERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES (AES) INCLUDING THE PAYMENT OF ROYALTY ON RECEIPT OF TECHNOLOGY REL ATING TO ITS ITA NO.5200/DEL/2010 6 MANUFACTURING ACTIVITY AND ITS INTERNATIONAL TRANSACT IONS PERTAINING TO MANUFACTURING ACTIVITY WERE CLUBBED TOGETHER AND BE NCHMARK USING TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APP ROPRIATE METHOD. THE NECESSARY TECHNOLOGY FOR THE MANUFACTURE OF A RANGE OF MACHINES INCLUDING ITS FLAGSHIP PRODUCT 3DX WAS LICENSE D BY THE ASSESSEE FROM JCB GROUP FOR WHICH THE ASSESSEE HAD ENTERED INTO TECHNOLOGY TRANSFER AGREEMENT WITH JCB GROUP IN MARC H 2004 AND PRIOR TO THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF THE PRODUCT 3D. ACCORDING TO THE ASSESSEE TECHNOLOGY RELA TING TO THE PRODUCT CALLED 3D HAD BECOME OLD AND FOR UNDERGOING A CHANGE IT HAD BECOME COMPLETELY OBSOLETE. THE SAID PRODUCT WAS DEAL T WITH BY THE ASSESSEE SINCE THE YEAR 1987 AND THEREFORE THERE WAS U RGENT NEED TO UPGRADE THE TECHNOLOGY FOR LAUNCHING SUCH NEW PRODUC T KNOWN AS 3DX. IT IS HOW THE ASSESSEE HAD ENTERED INTO TECHNOLOGY TRANSF ER AGREEMENT WITH JCB GROUP IN MARCH 2004 FOR THE MANUFACTURING OF A RANGE OF NEW/ADVANCED PRODUCT NAMED AS 3DX. IN CONSIDERATION THE ASSESSEE AGREED TO PAY A LUMPSUM TECHNOLOGY TRANSFER FEE AS WEL L AS A RUNNING ROYALTY BASED ON PERCENTAGE OF TURNOVER AND IT IS BEC AUSE OF THAT THE ASSESSEE HAS PAID RUNNING ROYALTY OF ` 40 67 16 966/- AN D ALSO A SUM OF ` 97 26 299/- OF ANOTHER PRODUCT NAMED AS JS75 AN D THUS THE TOTAL ROYALTY PAID BY THE ASSESSEE WAS ` 41 64 43 265/-. THE ASSESSING OFFICER MADE A REFERENCE TO TPO TO DETERMINE THE AR MS LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY TH E ASSESSEE DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMEN T YEAR 2006-07 AND VIDE ORDER DATED 30 TH OCTOBER 2009 THE TPO HAS SUGGESTED AN UPWARD ADJUSTMENT OF INCOME BY ` 40 67 16 966/- AND ACCORDINGLY THE SAID ADDITION WAS MADE BY THE ASSESSING OFFICER REJECTING THE WRITTEN SUBMISSIONS OF THE ASSESSEE DATED 17 TH NOVEMBER 2009. THE TPO IN HIS ORDER WHILE UPHOLDING THE ADJUSTMENT OF ` 40 67 1 6 966/- HAS OBSERVED THAT ENGINE SPECIFICATIONS FOR BOTH 3D AND 3D X MODELS ARE IDENTICAL. HE HAS REJECTED THE CLAIM OF THE ASSESSEE TH AT ENGINE OF 3DX ITA NO.5200/DEL/2010 7 WAS MORE FUEL EFFICIENT. HE HAS COMPARED VARIOUS ASPEC TS OF BOTH THE MODELS NAMELY 3D AND 3DX AND HAS COME TO THE CONCLU SION THAT THERE WAS COSMETIC IMPROVEMENT CAUSED TO THE EXISTING 3 D MODEL TO CHANGE THE EXISTING MODEL 3D TO 3DX AND THEREFORE ROYALTY PAYMENT BY THE ASSESSEE TO ITS AE FOR 3DX WHEELED EXCAVATOR LOAD ERS IS NOT AT ARMS LENGTH. THE RELEVANT OBSERVATIONS OF TPO AS CONT AINED IN PARA 7 OF HIS ORDER ARE REPRODUCED FOR THE SAKE OF CONVENIEN CE:- 7. ON THE BASIS OF ABOVE DISCUSSION AND ANALYSIS I T IS FOUND THAT THE ASSESSEE COMPANY WHEN IT WAS A JOINT VENTURE COMPANY WITH ESCORTS LTD. WAS PAYING ROYALTY ON CERTAIN PRODUCTS FOR WHICH LICENSED TECHNOLOGY HAD BEEN RECEI VED FROM JCB GROUP. HOWEVER WITH RESPECT TO ONE PRODUCT I.E. WHEELED EXCAVATOR LOADERS (P92 OR 3DX VERSION) THE ASSESSEE HAS PAID ROYALTY FOR THE SAME PRODUCT WHICH HAS NOW BEEN LAUNCH ED WITH CERTAIN MODIFICATIONS. IN VIEW OF ABOVE DISCUSSION I T IS HELD THAT SO CALLED NEW PRODUCT 3DX IS EXISTING OLD PRODUCT 3D W ITH THE SAME ENGINE MANUFACTURED BY KIRLOSKAR LTD. AND OTHER C ORE COMPONENT AS DISCUSSED EARLIER IN THIS ORDER WITH MINO R MODIFICATION OF NON-CORE PARTS. IT IS PERTINENT TO MENTI ON HERE THAT THE ENGINE OF THE 3D AND 3DX VERSION OF THE WHEELED EXCAVATOR LOADERS IS THE SAME THE TECHNOLOGY FOR WHIC H HAS NOT BEEN GIVEN BY JCB GROUP BUT KIRLOSKAR LTD. SINCE THE ASSESSEE HAS ALREADY PAID ROYALTY FOR PRODUCT 3D AND HAD NOT CH ANGED ANY ROYALTY FROM YEAR 1987 TO F.Y. 2004-05 NO ROYALTY COULD BE PAID AT ARMS LENGTH PRICE ON THE SAME PRODUCT WITH COSM ETIC CHANGES IN THIS YEAR. THE PAYMENT OF ROYALTY APPEARS TO BE DRIVEN BY THE FACT THAT THE STRUCTURE OF THE ASSESSEE COMPA NY HAS CHANGED FROM JOINT VENTURE COMPANY TO 100% SUBSIDI ARY COMPANY. ON THE BASIS OF FACTS AS DISCUSSED ABOVE I T IS HELD THAT ROYALTY PAYMENT BY THE ASSESSEE TO ITS A.E. FOR 3DX WHEELED EXCAVATOR LOADERS IS NOT AT ARMS LENGTH. 5. AS AGAINST THE AFOREMENTIONED VIEW OF THE DEPARTME NT IT IS THE CASE OF THE ASSESSEE THAT THE CHANGES MADE BY THE MANUFAC TURER IN THE MODEL FROM 3D TO 3DX IS NEITHER COSMETIC NOR MINO R CHANGES THERE ARE SUBSTANTIVE CHANGES WHICH HAVE RESULTED IN NE W MODEL 3DX WHICH ARE MAJOR TECHNICAL CHANGES AND THEREFORE TH E TPO WAS WRONG IN HOLDING THAT THESE ARE MERE COSMETIC OR MINOR CHAN GES. FOR THE SAID PURPOSE IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAS OB TAINED FROM THE DEPARTMENT OF MECHANICAL ENGINEERING OF IN DIAN INSTITUTE OF ITA NO.5200/DEL/2010 8 TECHNOLOGY DELHI (IIT) TO BRING OUT THOSE DIFFERENC ES AND THIS REPORT IS DATED 18 TH JANUARY 2011 IN WHICH THEY HAVE CLEARLY DESCRIBED THAT THE CHANGES WHICH HAVE BEEN TERMED AS COSMETIC BY TPO ARE NOT MERELY COSMETIC OR MINOR CHANGES BUT THEY ARE SUBSTANTIVE CH ANGES AND ARE MAJOR TECHNICAL CHANGES. LD. AR AFTER NARRATING TH E FACTS SUBMITTED THAT THE ASSESSEE WANTS TO RELY UPON THE SAID REPORT WHIC H HAS BEEN OBTAINED BY THE ASSESSEE FROM IIT AND FOR THIS PURPOSE LEARNED AR SUBMITTED AN APPLICATION DATED 25 TH JANUARY 2011 FOR ADMISSION OF THE SAID REPORT AS AN ADDITIONAL EVIDENCE. RELYING UPON THE OBJECTIONS FILED BEFORE THE TPO THE ASSESSING OFFICER AND DISPUTE RESOLUT ION PANEL IT WAS SUBMITTED BY LD. AR THAT THE ADDITION ON ACCOUNT OF ARMS LENGTH PRICE HAS WRONGLY BEEN UPHELD BY DRP WITHOUT CONSIDER ING THE VARIOUS OBJECTIONS OF THE ASSESSEE. HE SUBMITTED THAT IN THE INT EREST OF JUSTICE AS THE SAID REPORT WILL GO TO THE ROOT OF THE MATTER THE SAME SHOULD BE CONSIDERED AS ADDITIONAL EVIDENCE AND SHOULD BE ADMITT ED AS IT IS MERELY SUPPORTING THE OBJECTIONS OF THE ASSESSEE WHICH HA VE BEEN DULY FILED BEFORE ALL THE AUTHORITIES MENTIONED ABOVE. 6. ON THE OTHER HAND IT WAS SUBMITTED BY LEARNED DR THAT THE SAID REPORT OF IIT SHOULD NOT BE ADMITTED AS THIS WAS NEVER FILED BEFORE ANY OF THE INCOME-TAX AUTHORITIES. WITHOUT PREJUDICE H E SUBMITTED THAT IF SUCH REPORT IS ADMITTED AS ADDITIONAL EVIDENCE AND IF THE MATTER IS RESTORED BACK THEN THE ISSUE MAY BE LEFT OPEN TO PRO VIDE EQUAL OPPORTUNITY TO THE DEPARTMENT TO ADDUCE ANY EVIDENC E TO PROVE THE CASE OF THE REVENUE. 7. IN THIS VIEW OF THE SITUATION AFTER HEARING BOTH THE PARTIES WE ADMIT THE REPORT FILED BY THE ASSESSEE AND OBTAINED BY IT FROM IIT AS ADDITIONAL EVIDENCE AS IT GOES TO THE ROOT OF THE MAT TER AND IT HAS BEEN FILED JUST TO SUPPORT THE CASE OF THE ASSESSEE ON MERITS TO DEMOLISH THE OBJECTION OF THE DEPARTMENT THAT THE CHANGES BROUGHT INTO 3DX MODEL ARE NOT MERE COSMETIC OR MINOR CHANGES BUT THEY ARE MAJOR CHANGES. ITA NO.5200/DEL/2010 9 8. NOW WE PROCEED TO DELIBERATE ON THE ISSUE THAT WH ETHER THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AR MS LENGTH PRICE ON THE BASIS OF DIRECTIONS OF TPO AND DRP ARE JU STIFIED OR THE MATTER IS REQUIRED TO GO BACK FOR RE-CONSIDERATION TH EREOF. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES. THE ORDER PASSED BY THE DRP HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. THE MATTER WAS REFERRE D TO THE DRP U/S 144C OF THE IT ACT. UNDER SUB-SECTION (1) OF SECTION 144C THE ASSESSING OFFICER IS UNDER AN OBLIGATION TO FORWARD A DR AFT OF THE PROPOSED ORDER OF ASSESSMENT TO THE ASSESSEE IF HE PROPOSES TO MAKE ON OR AFTER THE FIRST DAY OF OCTOBER 2009 ANY VARI ATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST O F SUCH ASSESSEE. UNDER SUB-SECTION (2) OF SECTION 144 THE ASSESSEE WITHIN 30 DAYS OF THE RECEIPT OF SUCH DRAFT ORDER CAN ACCEPT THE VARIA TION MADE BY THE ASSESSING OFFICER OR HE CAN FILE OBJECTIONS EITHER TO DI SPUTE RESOLUTION PANEL OR TO THE ASSESSING OFFICER. SINCE THE ASSESSEE HAD FILED HIS OBJECTIONS WITH DRP THEN UNDER SUB-SECTION (5) THE D RP UPON RECEIPT OF OBJECTION IS UNDER OBLIGATION TO ISSUE DIRECTIONS AS IT THINKS FIT FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMP LETE THE ASSESSMENT AND UNDER SUB-SECTION (6) SUCH DIRECTIONS WHICH ARE PUT UP UNDER SUB-SECTION (5) WOULD BE FURTHER CONSIDERING THE FOLLOWING DOCUMENTS: (A) DRAFT ORDER; (B) THE OBJECTION FILED BY THE ASSESSEE; (C) THE EVIDENCE FURNISHED BY THE ASSESSEE; (D) REPORT IF A NY OF THE ASSESSING OFFICER VALUATION OFFICER OR TPO OR ANY OTH ER AUTHORITY; (E) RECORDS RELATING TO THE DRAFT ORDER; (F) EVIDENCE CO LLECTED BY OR CAUSED TO BE COLLETED BY IT; AND (G) RESULT OF ANY INQUIRY MADE BY OR CAUSED TO BE MADE BY IT. UNDER SUB-SECTION (7) DRP IS ALSO AUT HORIZED BEFORE ISSUING OF DIRECTION UNDER SUB-SECTION (5) TO MAKE SUCH FURTHER INQUIRY AS IT THINK FIT OR CAUSE ANY FURTHER INQUIRY TO BE MA DE BY ANY INCOME- TAX AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT . UNDER SUB-SECTION ITA NO.5200/DEL/2010 10 (8) THE DRP HAS POWER TO CONFIRM REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO HOWEVER THAT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER SUB-SECT ION (5) FOR FURTHER INQUIRY AND PASSING OF THE ASSESSMENT ORDER. UND ER SUB- SECTION (11) NO DIRECTION U/S SUB-SECTION (5) SHALL BE I SSUED UNLESS AN OPPORTUNITY OF BEING HEARD IS GIVEN TO THE ASSESSEE AND THE ASSESSING OFFICER ON SUCH DIRECTIONS WHICH ARE PREJUDICIAL TO T HE INTEREST OF THE ASSESSEE OR THE INTEREST OF THE REVENUE RESPECTIVELY. U NDER SUB- SECTION (12) DIRECTIONS UNDER SUB-SECTION (5) CANNOT BE PASSED AFTER NINE MONTHS FROM THE END OF THE MONTH IN WHICH DRAFT ORDER IS FORWARDED TO THE ELIGIBLE ASSESSEE. UNDER SUB-SECTION (1 3) ON RECEIPT OF DIRECTIONS ISSUED UNDER SUB-SECTION (5) THE ASSESSING OF FICER HAS TO PASS THE ASSESSMENT ORDER IN CONFORMITY WITH THE DIRECTI ONS WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DI RECTIONS ARE RECEIVED. 10. THE DIRECTIONS PASSED BY DRP U/S 144C (5) AS IT CAN BE SEEN IN THE PRESENT CASE ARE NOT SPEAKING ABOUT WHAT OBJECTIO NS WERE RAISED BY THE ASSESSEE AND HOW THEY HAVE BEEN FOUND TO BE NOT ACCEPTABLE. IT IS SIMPLY OBSERVED BY THE DRP THAT THEY HAVE GONE T HROUGH THE DRAFT ASSESSMENT ORDER AND THEY HAVE HEARD THE AUTHORIZED REP RESENTATIVE AND HAVE CONSIDERED THE OBJECTIONS OF THE ASSESSEE CAREFU LLY AND AFTER CONSIDERING THE SAME THEY HAVE OPINED THAT DRAFT ASSESSME NT ORDER PROPOSED BY THE ASSESSING OFFICER IS TO BE APPROVED AND T HE DIRECTIONS ISSUED TO THE ASSESSING OFFICER ARE THAT THE ASSESSING OFFIC ER IS DIRECTED TO COMPLETE THE ASSESSMENT AS PROPOSED IN THE DR AFT ASSESSMENT ORDER. WE FIND THAT THIS ISSUE HAD COME UP BE FORE THE HONBLE DELHI HIGH COURT IN WRIT PETITION FILED BY VODAFONE ESSAR LTD. AGAINST THE ORDER PASSED BY THE DRP-II AND ORS. AND THE SAID WRIT PETITION HAS BEEN DECIDED BY THE HONBLE HIGH COURT VIDE THEIR ORDER ITA NO.5200/DEL/2010 11 DATED 2 ND DECEMBER 2010. THE ASSESSEE HAD FILED A WRIT OF CERT IORARI SEEKING THE QUASHING THE ORDER OF DRP AND THE REVENUE CONTENDED BEFORE THE HONBLE HIGH COURT THAT THE ORDER IN QUE STION DESERVE TO BE QUASHED AND THE MATTER WAS REMANDED FOR FRESH ADJUDIC ATION. THE SAID ORDER OF THE HONBLE DELHI HIGH COURT IS REPRODU CED BELOW:- JUDGEMENT JUDGEMENT JUDGEMENT JUDGEMENT HEARD MR. SYALI LD. SR. COUNSEL FOR THE PETITIONER AN D MR. SANJEEV SABHARWAL LD. STANDING COUNSEL FOR THE REVENUE. BY THIS WRIT PETITION THE PETITIONER HAS PRAYED FOR ISSUE OF A WRIT OF CERTIORARI FOR QUASHMENT OF THE ORDER DATED 30 TH SEPTEMBER 2010 PASSED BY THE DISPUTE RESOLUTION PANEL-II THE FIR ST RESPONDENT HEREIN. WHAT COULD HAVE BEEN A MATTER OF DE BATE WAS PUT TO REST BY MR. SANJEEV SABHARWAL LD. COUNSEL FOR THE REVENUE BY STATING THAT THE ORDER PASSED ON 30 TH SEPTEMBER 2010 CONTAINED IN ANNEXURE-P1 DESERVES TO BE QUASHE D AND THE MATTER BE REMANDED TO THE SAID AUTHORITY FOR FRESH ADJUDI CATION. IN VIEW OF THE AFORESAID FAIR CONCESSION THE ORDER D ATED 30 TH SEPTEMBER 2010 PASSED BY THE RESPONDENT NO. 1 IS QUAS HED AND THE MATER IS REMANDED TO THE SAID RESPONDENT TO ADJUDICATE AFRESH. BE IT NOTED WHEN A QUASI JUDICIAL AUTHORITY D EALS WITH A LIST IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND G ERMANE REASONS AS THE SAME IS THE HEARD AND SOUL OF THE MATTER AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. NEEDLE S TO SAY THAT THE COMPETENT AUTHORITY WHILE PASSING THE ORDER SHALL K EEP IN MIND THE ORDER DATED 29 TH NOVEMBER 2010 WHEREIN WE HAD DIRECTED THAT THE PERIOD FROM THE DATE OF FILING THE WRITE PETITION AND FOUR WEEKS AFTER ITS DISPOSAL SHALL STAND EXCLUDED WHILE COMPUTING THE LIMITATION FOR THE DEPARTMENT TO PASS AN ASSESSMENT ORDER. THE WRIT PETITION IS ALLOWED TO THE EXTENT INDICATED ABOVE WITHOUT ANY ORDER AS TO COSTS. ORDER DASTI UNDER THE SIGNATURES OF THE COURT MASTER. [WPO (C) 7028/2010] 11. THIS TRIBUNAL IN MANY OF SUCH CASES HAS RESTORED THE ISSUE TO THE FILE OF DRP FOR PASSING A SPEAKING ORDER ON EACH OF TH E OBJECTION OF THE ASSESSEE RAISED BEFORE IT. THEREFORE WE FIND THAT IT I S A FIT CASE WHERE THE ENTIRE MATTER SHOULD BE RESTORED BACK TO THE FILE OF DRP TO PASS A ITA NO.5200/DEL/2010 12 DETAILED ORDER STATING ALL THE OBJECTIONS OF THE ASSESSEE AND DISPOSING THEM BY GIVING A COGENT AND GERMANE REASONS FOR ADJUD ICATION OF THE OBJECTIONS OF THE ASSESSEE. WE DIRECT ACCORDINGLY. AFT ER RECEIVING THE ORDER FROM DRP THE ASSESSING OFFICER WILL AGAIN PASS ORD ER U/S 144C(13) AND THE PRESENT ASSESSMENT PASSED BY THE ASSESSING OF FICER IS SET ASIDE AS THE DRP IS DIRECTED TO RE-ADJUDICATE TH E OBJECTIONS RAISED BY THE ASSESSEE AS PER DIRECTIONS GIVE ABOVE. WE D IRECT ACCORDINGLY. 12. IN THE RESULT FOR STATISTICAL PURPOSES THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 31.01.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES ITA NO.5200/DEL/2010 13 DATE OF DICTATION 25.01.2011 DATE OF PRESENTATION OF THE DRAFT ORDER TO THE MEMBER 28.01.2011 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING DATE OF DISPATCH OF THE ORDER TO THE BENCH